MONTREAL • Ontario appears set to tap SNC-Lavalin Group Inc. for another key construction project as investors await the results of an internal probe by the engineering giant into millions worth of unexplained payments.

The province has picked the SNC-anchored 407 East Development Group as the preferred bidder for its $1-billion extension of Toronto toll road Highway 407, according to two separate trade publications specialized in infrastructure investments.

U.K.-based business intelligence publications Project Finance and Inframation Group said Friday that Ontario chose the East Development for the work, which includes designing, building, financing and maintaining the first leg of the new highway extension. SNC’s partners are Cintra Infraestructuras SA and Intoll Group. Together, they operate the existing 407 ETR under a 99-year exclusive concession and lands lease from the Ontario government.

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Ontario is maintaining ownership and operation of the toll road extension, retaining all revenues generated. A long-term bond issue will likely be used to finance the new construction, Project Finance said.

Three groups were short-listed for the contract. SNC and its partners beat out a team led by Spanish multinational OHL and another group whose members included German builder Bilfinger Berger and Toronto investment firm Fengate Capital.

Paulette den Elzen, an official with Infrastructure Ontario, denied the contract was finalized, saying that talks with one “first-ranked bidder” continue and that negotiations are not completed. She declined to name the bidder.

The province said Nov.9 it expected to select a successful bidder “in early 2012” with project costs made public following the financial close of the project in the spring 2012.

SNC-Lavalin spokesperson Leslie Quinton said Friday the company has not received official notice from the government about a preferred bidder selection.

Highway 407 East will be built in two phases. A first leg will extend the existing 407 ETR some 22 kilometres east to Oshawa. A second leg will continue the highway further east to Highway 35/115.

Although exact revenues and earnings per share for SNC at this time would be only estimates, they will be “significant,” Alta Corp. Capital analyst Maxim Sytchev said.

Movement in the 407 extension project comes as Montreal-based SNC, Canada’s largest engineering firm, remains engulfed in a crisis related to its work in Libya.

Its board of directors, with the help of an outside law firm, is investigating $35-million worth of improper payments to its construction business in the fourth quarter of 2011 as well as “certain other contracts” of an unknown scope.

The executive who led the construction business during that time, Riadh Ben Aissa, has left the firm as questions persist about just how far SNC-Lavalin pushed its relationship with the family of former Libyan leader Muammar Gaddafi.

An investor class action authorization suit filed March 1 alleges the company and certain members of its senior management were engaged in “serious, unlawful activities in Libya.” The claims have not been proven.

SNC-Lavalin has won more than half a billion worth of contract revenue in the past week alone, winning a contract from Brazilian mining giant Vale SA to modernize its nickel smelting complex in Sudbury and another from Ontario Power Generation to refurbish four reactors at the Darlington nuclear generating station.

SNC shares closed down 1% to $39.40 Friday on the Toronto Stock Exchange.

Since Feb.8, the day before SNC announced Mr. Ben Aissa’s departure, they have lost 26% of their value.

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